BondBloxx Targets Advisors With Private Credit ETF

Fixed income ETF issuer BondBloxx is targeting sophisticated financial advisors with a new ETF that offers direct exposure to the private credit markets.

The BondBloxx Private Credit CLO ETF (PCMM), which started trading Tuesday morning, is being promoted as the first ETF giving investors direct access to the securitized debt of a swath of the U.S. economy known as middle-market companies.

“Private credit comes up in every client conversation, and financial advisors are looking for better access,” said Tony Kelly, co-founder of Larkspur, Calif.-based BondBloxx, which manages 25 ETFs that combine for more than $3 billion under management.

Private Credit Offers Fixed Income Diversification

The appeal of private credit, as a portfolio management tool, is diversification on the fixed income side. Private credit is typically a short-duration asset with low correlation to stocks or corporate bonds and is typically immune to monetary policy movement by the Federal Reserve.

PCMM, which charges 68 basis points, invests at least 80% of its assets in private credit collateralized loan obligations, or CLOs.

As Kelly explained, PCMM will access the private credit markets by investing in the publicly traded CLOs that provide capital for the private credit loans.

The private credit market is a $30 trillion asset class, and the middle market companies that PCMM is focused on represent a nearly $5 trillion slice.

According to BondBloxx, there are approximately 300,000 middle-market companies in the U.S., generating $13 trillion in annual revenue.

The current yields in this segment of the private credit market are around 7%.

BondBloxx is marketing PCMM as a strategic allocation in portfolios to seek enhanced returns and increased diversification, and as a piece of a broader credit allocation within fixed income.

Kelly is banking on advisors turning to the ETF as a lower-cost and more liquid alternative to interval funds as a means of accessing the private credit markets.

“Through PCMM, we are now able to offer investors an efficient way to participate in private credit with the liquidity, transparency, and cost advantages of an ETF,” he said.